Correlation Between Apple and First Phosphate

Can any of the company-specific risk be diversified away by investing in both Apple and First Phosphate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Apple and First Phosphate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and First Phosphate Corp, you can compare the effects of market volatilities on Apple and First Phosphate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Apple with a short position of First Phosphate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and First Phosphate.

Diversification Opportunities for Apple and First Phosphate

0.67

Correlation Coefficient

Apple  First Phosphate

Poor diversification

The 3 months correlation between Apple and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and First Phosphate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Phosphate Corp and Apple is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Apple Inc are associated (or correlated) with First Phosphate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Phosphate Corp has no effect on the direction of Apple i.e., Apple and First Phosphate go up and down completely randomly.

Pair Corralation between Apple and First Phosphate

Given the investment horizon of 90 days Apple Inc is expected to generate 0.3 times more return on investment than First Phosphate. However, Apple Inc is 3.33 times less risky than First Phosphate. It trades about 0.11 of its potential returns per unit of risk. First Phosphate Corp is currently generating about -0.03 per unit of risk. If you would invest  12,473  in Apple Inc on September 18, 2024 and sell it today you would earn a total of  12,340  from holding Apple Inc or generate 98.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.78%
Values	Daily Returns

Apple Inc  vs.  First Phosphate Corp

Apple Inc

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Phosphate Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Phosphate Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, First Phosphate reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and First Phosphate

The main advantage of trading using opposite Apple and First Phosphate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, First Phosphate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Phosphate will offset losses from the drop in First Phosphate's long position.

The idea behind Apple Inc and First Phosphate Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.